Projects

1. Explain what project management is and why it is important.

2. Identify the different ways projects can be structured in an organization.

3. Describe how project objectives are set.4. Describe how projects are organized into

components using work breakdown structure5. Determine the “critical path” for a project.6. Demonstrate how to “crash,” or reduce the

length, of a project.

Building: a ship, a satellite, an oil rig, and a nuclear plant.

Developing: computer programs, an advertising campaign, a new product, a new process, and training materials.

Implementing: new technologies and work procedures..

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Project: a series of related jobs usually directed toward some major output and requiring a significant period of time to perform

Project management: the management activities of planning, directing, and controlling resources (people, equipment, material) to meet the technical, cost, and time constraints of a project

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The 4The 4thth dimension: dimension:

client client satisfactionsatisfaction

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Project Life CycleProject Life Cycle: changing patterns of : changing patterns of resource usage and level of activity resource usage and level of activity over the course of the project over the course of the project

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Stages of a Conventional Project:Stages of a Conventional Project:◦ Slow beginningSlow beginning◦ Buildup of sizeBuildup of size◦ PeakPeak◦ Begin a declineBegin a decline◦ TerminationTermination

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Time distribution of project effort is Time distribution of project effort is characterized by slow-rapid-slowcharacterized by slow-rapid-slow

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Risk during project life cycleRisk during project life cycle◦With most projects there is some With most projects there is some

uncertainty about the ability to meet uncertainty about the ability to meet project goalsproject goals

◦Uncertainty of outcome is greatest at Uncertainty of outcome is greatest at the start of a projectthe start of a project

◦Uncertainty decreases as the project Uncertainty decreases as the project moves toward completionmoves toward completion

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Try to avoid the “90-90 rule of project Try to avoid the “90-90 rule of project management”: management”:

The first 90% of the project The first 90% of the project takes 90% of the time, the takes 90% of the time, the last 10% takes the other last 10% takes the other 90%.90%.

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What does this rule really What does this rule really mean?mean?

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During the life cycle cycle, project During the life cycle cycle, project management is accomplished through management is accomplished through the use of processes such as:the use of processes such as: Initiating, planning, executing, controlling, Initiating, planning, executing, controlling,

and closing and closing Many of these processes are iterative in Many of these processes are iterative in

nature because the project is being nature because the project is being progressively elaboratedprogressively elaborated

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An Alternate View*An Alternate View*Stage 1: Excitement – Euphoria Stage 1: Excitement – Euphoria Stage 2: Disenchantment Stage 2: Disenchantment Stage 3: Search for the Guilty Stage 3: Search for the Guilty Stage 4: Punishment of the Innocent Stage 4: Punishment of the Innocent Stage 5: Distinction for the UninvolvedStage 5: Distinction for the Uninvolved

*Author unknown but believed to have *Author unknown but believed to have perished in stage 4perished in stage 4

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Pure project Functional project Matrix project

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Advantages◦ The project manager has full authority◦ Team members report to one boss◦ Shortened communication lines◦ Team pride, motivation, and commitment are high

Disadvantages◦ Duplication of resources◦ Organizational goals and policies are ignored◦ Lack of technology transfer◦ Team members have no functional area "home"

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Advantages◦ A team member can work on several projects◦ Technical expertise maintained in functional area◦ Functional area is “home” after project completed◦ Critical mass of specialized knowledge

Disadvantages◦ Aspects of the project that are not directly related to

the functional area get short-changed◦ Motivation of team members is often weak◦ Needs of the client are secondary and are responded

to slowly

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Advantages◦ Better communications between functional areas◦ Project manager held responsible for success◦ Duplication of resources is minimized◦ Functional “home” for team members◦ Policies of the parent organization are followed

Disadvantages◦ Too many bosses◦ Depends on project manager’s negotiating skills◦ Potential for sub-optimization

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Why Set Project Objectives To provide direction for project

activities To enable measuring results against

prior exceptions Resource usage (manpower,

materials, etc.) ◦ Schedule integrity ◦ Quality of work

To determine specific goals which will provide maximum effectiveness of project activities

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Requirements for Project Objectives Achievable (time, resources, staff) Understandable (vs. complex) Specific (vs. general, vague

statements) Tangible (“deliverables”) Measurable (resources, schedule,

quality) Consistent (with strategy, programs,

policies, procedures) Assignable (department or individual)

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Example: D.U. Singer Project Title: Permanent Antiseptic Production Start-

Up Objectives:

◦ Develop a comprehensive plan for the production of a new, permanent antiseptic

◦ Complete development and testing of a manufacturing process that: Meets all current FDA, EPA, and OSHA regulations as

well as internal specifications produces 95% yield of product (full packaged) at a

level of 80% of full production goal of 10 million liters per year

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Be careful of the jargon!

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Statement of work (SOW): a written description of the objectives to be achieved

Task: a further subdivision of a project◦ Usually shorter than several months◦ Performed by one group or organization

Work package: a group of activities combined to be assignable to a single organizational unit

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Project milestones: specific events on the project

Work breakdown structure (WBS): defines the hierarchy of project tasks, subtasks, and work packages

Activities: pieces of work that consume time◦ Defined within the context of the WBS

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Program: New Product Introduction

1.0 Project 1: Engineering Development 1.1 Task 1: Run pilot test 1.2 Task 2: Review process costs

and efficiencies 1.3 Task 3: Prepare Capital

Equipment List

2.0 Project 2: Market Survey 2.1 Task 1: Complete Market Survey 2.2 Task 2: Analyze Survey Results 2.3 Task 3: Prepare Marketing Plan

Work Breakdown StructureWork Breakdown Structure

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3.03.0 Project 3: Manufacturing Start-up Project 3: Manufacturing Start-up 3.1 3.1 Task 1: Task 1: Install and Test New Install and Test New Equipment Equipment 3.23.2 Task 2: Task 2: Establish Manufacturing Establish Manufacturing

Procedures Procedures 3.3 3.3 Task 3: Task 3: Detailed Testing of Initial Detailed Testing of Initial

Output Output

4.0 Project 4: Sales Force Training 4.0 Project 4: Sales Force Training 4.14.1 Task 1: Task 1: Select Sales People Select Sales People 4.2 4.2 Task 2: Task 2: Select Distributors Select Distributors 4.3 4.3 Task 3:Task 3: Train Sales Force and Train Sales Force and

Distributors Distributors

Work Breakdown StructureWork Breakdown Structure

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Charts are useful because their visual presentation is easily understood

Software is available to create the charts Gantt chart: a bar chart showing both the

amount of time involved and the sequence in which activities can be performed

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A project is made up of a sequence of activities that form a network representing a project

The path taking longest time through this network of activities is called the “critical path”

The critical path provides a wide range of scheduling information useful in managing a project

Critical Path Method (CPM) helps to identify the critical path(s) in the project networks

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A project must have:

well-defined jobs or tasks whose completion marks the end of the project;

independent jobs or tasks;

and tasks that follow a given sequence.

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CPM with a Single Time Estimate◦ Used when activity times are known with

certainty◦ Used to determine timing estimates for

the project, each activity in the project, and slack time for activities

CPM with Three Activity Time Estimates◦ Used when activity times are uncertain ◦ Used to obtain the same information as

the Single Time Estimate model and probability information

Time-Cost Models◦ Used when cost trade-off information is a

major consideration in planning◦ Used to determine the least cost in

reducing total project time LO 5LO 5

1. Identify each activity to be done and estimate how long it will take

2. Determine the requires sequence and construct a network diagram

3. Determine the critical path4. Determine the early start/finish and late

start/finish schedule

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ActivityActivity DesignationDesignation Immed. Pred.Immed. Pred. Time (Weeks)Time (Weeks)Assess customer's needsAssess customer's needs AA NoneNone 22Write and submit proposalWrite and submit proposal BB AA 11

Obtain approvalObtain approval CC BB 11

Develop service vision and goalsDevelop service vision and goals DD CC 22Train employeesTrain employees EE CC 55Quality improvement pilot groupsQuality improvement pilot groups FF D, ED, E 55Write assessment reportWrite assessment report GG FF 11

Develop a critical path diagram and determine Develop a critical path diagram and determine the duration of the critical path and slack times the duration of the critical path and slack times

for all activities. for all activities. LO 5LO 5

A(2)A(2) B(1)B(1) C(1)C(1)

D(2)D(2)

E(5)E(5)

F(5)F(5) G(1)G(1)

AA NoneNone 22

BB AA 11

CC BB 11

DD CC 22

EE CC 55

FF D,ED,E 55

GG FF 11

Act.Act. Imed. Pred. TimeImed. Pred. Time

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Activities on the critical path cannot be delayed without delaying the completion of the project

There are two paths:A – B – C – D – F – G: 12 weeksA – B – C – E – F – G: 15 weeks Activity D can be delayed by up to 3

weeks without delaying the project The longest path is critical – why?

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ES=9ES=9EF=14EF=14

ES=14ES=14EF=15EF=15

ES=0ES=0EF=2EF=2

ES=ES=22

EF=EF=33

ES=3ES=3EF=4EF=4

ES=4ES=4EF=9EF=9

ES=4ES=4EF=6EF=6

A(2)A(2) B(1)B(1) C(1)C(1)

D(2)D(2)

E(5)E(5)

F(5)F(5) G(1)G(1)

Hint: Start with ES=0 Hint: Start with ES=0 and go forward in the and go forward in the network from A to G.network from A to G.

Hint: Start with ES=0 Hint: Start with ES=0 and go forward in the and go forward in the network from A to G.network from A to G.

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ES=9ES=9EF=14EF=14

ES=14ES=14EF=15EF=15

ES=0ES=0EF=2EF=2

ES=2ES=2EF=3EF=3

ES=3ES=3EF=4EF=4

ES=4ES=4EF=9EF=9

ES=4ES=4EF=6EF=6

A(2)A(2) B(1)B(1) C(1)C(1)

D(2)D(2)

E(5)E(5)

F(5)F(5) G(1)G(1)

LS=14LS=14LF=15LF=15

LS=9LS=9LF=14LF=14

LS=4LS=4LF=9LF=9

LS=7LS=7LF=9LF=9

LS=3LS=3LF=4LF=4

LS=2LS=2LF=3LF=3

LS=0LS=0LF=2LF=2

Hint: Start with LF=15 or the total time of the project and go backward in the network from G to A.

Hint: Start with LF=15 or the total time of the project and go backward in the network from G to A.

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ES=9ES=9EF=14EF=14

ES=14ES=14EF=15EF=15

ES=0ES=0EF=2EF=2

ES=2ES=2EF=3EF=3

ES=3ES=3EF=4EF=4

ES=4ES=4EF=9EF=9

ES=4ES=4EF=6EF=6

A(2)A(2) B(1)B(1) C(1)C(1)

D(2)D(2)

E(5)E(5)

F(5)F(5) G(1)G(1)

LS=14LS=14LF=15LF=15

LS=9LS=9LF=14LF=14

LS=4LS=4LF=9LF=9

LS=7LS=7LF=9LF=9

LS=3LS=3LF=4LF=4

LS=2LS=2LF=3LF=3

LS=0LS=0LF=2LF=2

Duration=Duration=15 weeks15 weeks

Slack=(7-4)=(9-6)= 3 WksSlack=(7-4)=(9-6)= 3 Wks

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Activity Description Immed. Preds.

A Build internal components -

B Modify roof and floor -

C Construct collection stack A

D Pour concrete and install frame

A, B

E Build high-temperature burner

C

F Install pollution control system

C

G Install air pollution device D, E

H Inspect and test F, G

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StartStart

AA

BB

CC

DD

EE

FF

GG

HH

Arrows show Arrows show

precedence precedence

relationshipsrelationships

22

33

22

44

44

33

55

22

Start is a “Dummy” Start is a “Dummy” activity with 0 durationactivity with 0 duration

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Latest Latest FinishFinish

ESES

LSLS

EFEF

LFLF

Earliest Earliest FinishFinish

Latest Latest StartStart

Earliest Earliest StartStart

Activity Activity Nam

eNam

eActivity Activity DurationDuration

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StartStart

AA

BB

CC

DD

EE

FF

GG

HH

Arrows show Arrows show

precedence precedence

relationshipsrelationships

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Four paths in the network:Path 1: Start – A – C – F – H: 9 weeksPath 2: Start – A – C – E – G – H: 15 weeksPath 3: Start – A – D – G – H: 13 weeksPath 4: Start – B – D – G – H: 14 weeks

Path 2 is critical

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A, C, E, G, and H are on the critical path and so they have 0 slack

B is on path 4, so its slack is 15 – 14 = 1 D is on paths 3 and 4, so its slack is 15 –

Max (13,14) = 1 F is on path 1, so its slack is 15 – 9 = 6 An activity can be delayed by its slack and

not delay the project completion

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Slack=0Slack=0

StartStart

AA

BB

CC

DD

FF

FF

GG

HHHH

13131313

22

15151515

HHGG

8888

55

13131313

HHFF

441010

33

771313

HHCC

2222

22

4444

HHEE

4444

44

8888

HHDD

3344

44

7788

HHBB

0011

33

3344

HHAA

0000

22

2222

HH0000

00

0000

Slack=0Slack=0 Slack=0Slack=0

Slack=0Slack=0

Slack=0Slack=0

Slack=6Slack=6

Slack=1Slack=1Slack=1Slack=1

StartStart

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Great Valley General HospitalGreat Valley General HospitalGreat Valley General HospitalGreat Valley General Hospital

A Build internal componentsA Build internal components

B Modify roof and floorB Modify roof and floorC Construct collection stackC Construct collection stackD Pour concrete and install D Pour concrete and install

frameframeE Build high-temperature E Build high-temperature

burnerburnerF Install pollution control F Install pollution control

systemsystemG Install air pollution deviceG Install air pollution device

H Inspect and testH Inspect and test

1 2 3 4 5 6 7 8 9 10 1112 13 1 2 3 4 5 6 7 8 9 10 1112 13 1415 161415 16

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A-C-F-G: 38 A-C-E-G: 35 A-B-D-F-G: 38 A-B-D-E-G: 35

Paths A-C-F-G and A-B-D-F-G are both critical

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If a single time estimate is not reliable, then use three time estimates◦ a = Optimistic (Minimum)◦ b = Pessimistic (Maximum)◦ m = Most likely

Allows us to obtain a probability estimate for completion time for the project

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TaskImmediate

Predecesors Optimistic Most Likely PessimisticA None 3 6 15B None 2 4 14C A 6 12 30D A 2 5 8E C 5 11 17F D 3 6 15G B 3 9 27H E,F 1 4 7I G,H 4 19 28

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ET(A)= ET(A)= [[3+4(6)+15]/63+4(6)+15]/6

ET(A)= ET(A)= [[3+4(6)+15]/63+4(6)+15]/6

ET(A)=42/6=7ET(A)=42/6=7ET(A)=42/6=7ET(A)=42/6=7

TaskImmediate

PredecesorsExpected

TimeA None 7B None 5.333C A 14D A 5E C 11F D 7G B 11H E,F 4I G,H 18

TaskImmediate

Predecesors Optimistic Most Likely PessimisticA None 3 6 15B None 2 4 14C A 6 12 30D A 2 5 8E C 5 11 17F D 3 6 15G B 3 9 27H E,F 1 4 7I G,H 4 19 28

Expected Time = Opt. Time + 4(Most Likely Time) + Pess. Time

6Expected Time =

Opt. Time + 4(Most Likely Time) + Pess. Time

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TaskImmediate

PredecesorsExpected

TimeA None 7B None 5.333C A 14D A 5E C 11F D 7G B 11H E,F 4I G,H 18

ET(B)=32/6=5.333ET(B)=32/6=5.333ET(B)=32/6=5.333ET(B)=32/6=5.333

ET(B)= ET(B)= [[2+4(4)+14]/62+4(4)+14]/6

ET(B)= ET(B)= [[2+4(4)+14]/62+4(4)+14]/6

TaskImmediate

Predecesors Optimistic Most Likely PessimisticA None 3 6 15B None 2 4 14C A 6 12 30D A 2 5 8E C 5 11 17F D 3 6 15G B 3 9 27H E,F 1 4 7I G,H 4 19 28

Expected Time = Opt. Time + 4(Most Likely Time) + Pess. Time

6Expected Time =

Opt. Time + 4(Most Likely Time) + Pess. Time

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TaskImmediate

PredecesorsExpected

TimeA None 7B None 5.333C A 14D A 5E C 11F D 7G B 11H E,F 4I G,H 18

ET(C)= ET(C)= [[6+4(12)+30]/66+4(12)+30]/6

ET(C)= ET(C)= [[6+4(12)+30]/66+4(12)+30]/6

ET(C)=84/6=14ET(C)=84/6=14ET(C)=84/6=14ET(C)=84/6=14

TaskImmediate

Predecesors Optimistic Most Likely PessimisticA None 3 6 15B None 2 4 14C A 6 12 30D A 2 5 8E C 5 11 17F D 3 6 15G B 3 9 27H E,F 1 4 7I G,H 4 19 28

Expected Time = Opt. Time + 4(Most Likely Time) + Pess. Time

6Expected Time =

Opt. Time + 4(Most Likely Time) + Pess. Time

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NetworkNetwork

A(7)A(7)

BB(5.333)(5.333)

C(14)C(14)

D(5)D(5)

E(11)E(11)

F(7)F(7)

H(4)H(4)

G(11)G(11)

I(18)I(18)

Duration = 54 DaysDuration = 54 Days

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Probability ExerciseProbability Exercise

What is the probability of finishing this project in What is the probability of finishing this project in less than 53 days?less than 53 days?

What is the probability of finishing this project in What is the probability of finishing this project in less than 53 days?less than 53 days?

p(t < D)p(t < D)

TTE E = 54= 54

Z = D - TE

cp2

Z = D - TE

cp2

ttD=53D=53

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Activity variance, = (Pessim. - Optim.

6)2 2Activity variance, = (

Pessim. - Optim.

6)2 2

Task Optimistic Most Likely Pessimistic VarianceA 3 6 15 4B 2 4 14C 6 12 30 16D 2 5 8E 5 11 17 4F 3 6 15G 3 9 27H 1 4 7 1I 4 19 28 16(Sum the variance (Sum the variance along the along the

critical pathcritical path.).) 2 = 41 2 = 41

a m ba m b

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There is a 43.8% probability that this project will There is a 43.8% probability that this project will be completed in less than 53 weeks.be completed in less than 53 weeks.

There is a 43.8% probability that this project will There is a 43.8% probability that this project will be completed in less than 53 weeks.be completed in less than 53 weeks.

p(Z < -.156) = .438, or 43.8 % (NORMSDIST(-.156))p(Z < -.156) = .438, or 43.8 % (NORMSDIST(-.156))p(Z < -.156) = .438, or 43.8 % (NORMSDIST(-.156))p(Z < -.156) = .438, or 43.8 % (NORMSDIST(-.156))

Z = D - T

=53- 54

41= -.156E

cp2

Z = D - T

=53- 54

41= -.156E

cp2

TTE E = 54= 54

p(t < D)p(t < D)

ttD=53D=53

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What is the probability that the project duration will exceed 56 weeks?

What is the probability that the project duration will exceed 56 weeks?

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ttTTE E = 54= 54

p(t < D)p(t < D)

D=56D=56

Z = D - T

=56 - 54

41= .312E

cp2

Z = D - T

=56 - 54

41= .312E

cp2

p(Z > .312) = p(Z > .312) = .378.378, or , or 37.8 %37.8 % (1-NORMSDIST(.312)) (1-NORMSDIST(.312)) p(Z > .312) = p(Z > .312) = .378.378, or , or 37.8 %37.8 % (1-NORMSDIST(.312)) (1-NORMSDIST(.312)) LO 5LO 5

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Two critical paths:Two critical paths:A-C-F-G: var. = 11 8/9 = 11.89A-C-F-G: var. = 11 8/9 = 11.89A-B-D-F-G var. = 10 2/9 = 10.33A-B-D-F-G var. = 10 2/9 = 10.33Take larger var.Take larger var.

0.1922 prob So

87.089.11

3835

Weeks35in Finishing ofy Probabilit

2

cp

ETDZ

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Basic assumption: Relationship between activity completion time and project costTime cost models: Determine the optimum point in time-cost tradeoffs◦ Activity direct costs◦ Project indirect costs◦ Activity completion times

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1. Prepare a CPM-type network diagram2. Determine the cost per unit of time to

expedite each activity3. Compute the critical path4. Shorten the critical path at the least cost5. Plot project direct, indirect, and total-cost

curves and find the minimum-cost schedule

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Assumes indirect cost is a constant Assumes indirect cost is a constant $10 up to 8 days and increases $10 up to 8 days and increases $5/day thereafter$5/day thereafter

8 days is lowest total cost 8 days is lowest total cost

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Four paths in the network:Path 1: Start – A – C – F – H: 9 weeksPath 2: Start – A – C – E – G – H: 15 weeksPath 3: Start – A – D – G – H: 13 weeksPath 4: Start – B – D – G – H: 14 weeks

Path 2 is critical Assume $0 indirect costs Desire to crash this project by two

weeks at the smallest direct cost

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Act. NT CT NC CC CC/WK CP?A 2 1 22,000 22,750 750 YB 3 1 30,000 34,000 2000 NC 2 1 26,000 27,000 1,000 YD 4 3 48,000 49,000 1,000 NE 4 2 56,000 58,000 1,000 YF 3 2 30,000 30,500 500 NG 5 2 80,000 84,500 1,500 Y H 2 1 16,000 19,000 3,000 Y Total: 308,000 to complete the

project in 15 weeks – called the normal cost

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Select the activity with smallest crash cost per week that is on the critical path – activity A at a cost of $750

Start – B – D – G – H is also critical (14 wks)

Crash G by 1 week at a cost of $1,500 to reduce the project by an additional week (vs. crashing C and D at a combined cost of $2,000)

Cost to complete project in 13 weeks = $308,000 + 750 + 1,500 = $310,250

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In addition to scheduling each task, must assign resources

Software can spot over-allocation◦ Allocations exceed resources

Must either add resources or reschedule◦ Moving a task within slack can free up resources

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Actual progress on a project will be different from the planned progress◦ Planned progress is called the baseline

A tracking Gantt chart superimposes the current schedule onto a baseline so deviations are visible

Project manager can then manage the deviations

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